Federal Court of Australia

Shaw, in the matter of Ausglobal Construction Pty Ltd [2024] FCA 1143

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 439A(6) of the Corporations Act 2001 (Cth), and (or) alternatively s 447A of the Corporations Act, the period within which the plaintiffs must convene the second meeting of creditors in respect of Ausglobal Construction Pty Ltd (Administrators Appointed) ACN 642 038 622 (the company) under s 439A of the Corporations Act (second meeting) be extended to 8 October 2024.

2.    Pursuant to s 447A(1) of the Corporations Act, Pt 5.3A of that Act is to operate in relation to the company such that, notwithstanding s 439A(2) of that Act the second meeting must be held at any time before, or within five (5) business days after, the end of the convening period as extended by paragraph 1 of these orders.

3.    The Registrar is directed to refer any application by a non-party to inspect the affidavit of Cameron Hugh Shaw sworn 2 August 2024 and marked confidential to a judge of the Court and the non-party must serve its application on the plaintiffs and the company in accordance with r 10.31 of the Federal Court Rules 2011 (Cth).

4.    The costs of the relief sought in paragraphs 1 - 3 of the originating process be costs in the voluntary administration of the company.

5.    The plaintiffs take steps to cause notice of these orders to be given, within one (1) business day after making these orders to: (a) the creditors (including persons claiming to be creditors) of the company in the following manner: (i) where the plaintiffs have an email address for a creditor, by notifying each such creditor, via email of the making of the orders; (ii) where the plaintiffs do not have an email address, by publishing the orders on the website maintained by the plaintiffs, and (b) the Australian Securities and Investments Commission, by its email address.

6.    Any person who demonstrates a sufficient interest to vary or discharge orders 1 - 5 above (including any creditor of the company) have liberty to apply to the Court on three (3) business days' written notice to the plaintiffs.

7.    The plaintiffs have liberty to apply for further or other orders and to vary or discharge these orders.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

REVISED FROM THE TRANSCRIPT

FEUTRILL J:

1    The application before me today is an urgent application under s 439A(6) and s 447A of the Corporations Act 2001 (Cth) to extend the time within which the plaintiffs, as administrators of Ausglobal Construction Pty Ltd (administrators appointed), the company under administration, must convene the second meeting of creditors under s 439A(2) of the Act.

2    The administrators rely on an affidavit of Mr Cameron Hugh Shaw, one of the administrators, sworn 2 August 2024, a further affidavit of Mr Shaw, sworn 5 August 2024, and an affidavit of Ms Mandee-Jean de Reus, sworn 5 August 2024. The administrators also rely on a confidential affidavit of Mr Shaw, sworn 2 August 2024. They seek orders, in effect, to maintain the confidentiality of the facts deposed in that affidavit as part of the orders sought in the application. The administrators also seek orders in terms of a minute of proposed orders dated 2 August 2024 that reflect, largely, the orders sought in the originating application. In addition, the administrators rely on written submissions filed on 5 August 2024 and oral submissions made on what is, in effect, an ex parte hearing of the application.

3    I will refer to the plaintiffs as the administrators. They were appointed to the company on 11 July 2024 under s 436A of the Act. The company conducted and continues to conduct a residential and commercial construction business. It is part of a group of companies known as the Ausglobal Group, and it is a wholly owned subsidiary of a company named Ausglobal Finance Pty Ltd. The sole director of the company is Mr Wei Su, also known as Peter Su. As at the time of the appointment of the administrators, the company had only one ongoing construction project but has a number of projects where the building has been completed, where the defects liability period is ongoing and the company remains obliged to carry out rectification work under the applicable construction contracts.

4    Pursuant to s 436E and s 439A of the Act, the administrators are required to convene what are referred to as the first meeting of creditors and second meeting of creditors within a relatively short timeframe after their appointment. The first meeting of creditors was convened and held on 23 July 2024 within eight business days after the administration began, as required by s 436E of the Act. The administrators are required to convene the second meeting of creditors within 20 business days after the administration began and hold that meeting within five business days before and five business days after the end of the convening period under ss 439A(1), 439A(2) and 439A(5). The Court has power to extend the convening period under s 439A(6) of the Act.

5    Pursuant to s 439C of the Act, at the second meeting of creditors, the creditors may resolve that:

(a)    the company execute a deed of company arrangement;

(b)    the administration should end; or

(c)    the company be wound up.

6    Pursuant to s 438A of the Act, amongst other things, as soon as practicable after the administration of the company begins, the administrator must:

(a)    investigate the company's business, property, affairs and financial circumstances; and

(b)    form an opinion about each of the following matters:

(i)    whether it would in the interests of the company's creditors for the company to execute a deed of company arrangement;

(ii)    whether it would be in the creditors' interest for the administration to end; and

(iii)    whether it would in the creditors' interest for the company to be wound up.

7    There are a number of provisions in Pt 5.3A of the Act that address powers of the administrators and other matters to assist the administrators in, amongst other things, forming that opinion, including s 438B, which provides that the directors are to assist the administrators, and s 438C, which deals with administrators’ right to the company's books.

8    Rule 75-225(2)(a) of the Insolvency Practice Rules (Corporations) 2016 (Cth) requires the notice convening a second meeting of creditors to be accompanied by a report to the creditors about the company's business, property, affairs and financial circumstances and a statement setting out, amongst other things, whether, in the administrators’ opinion, it would be in the creditors' interest for the company to execute a deed of company arrangement, for the administration to end or for the company to be wound up. That report is known as the major report, and the evident purpose of it is to inform the creditors of the administrator's opinions and inform their decision on each of the three things the creditors may decide at the second creditors’ meeting under s 439C of the Act.

9    The object of Pt 5.3A of the Act is set out in s 435A, which is:

... to provide for the business, property and affairs of an insolvent company to be administered in a way that:

(a)    maximises the chances of the company, or as much as possible of its business, continuing in existence; or

(b)    if it is not possible for the company or its business to continue in existence—results in a better return for the company's creditors and members than would result from an immediate winding up of the company.

10    In addition to the power of the Court mentioned earlier in these reasons under s 439A(6) to extend time for the convening period, the Court has power to make such orders as it thinks appropriate about how Pt 5.3A is to operate in relation to a particular company under s 447A. That power extends to making what is referred to as a Daisytek order, after the authority in which such an order was first made: Re Daisytek Australia Pty Ltd [2003] FCA 575; 45 ACSR 446. The effect of such an order is to allow the administrators to convene and hold the second meeting of creditors at any time during the extended convening period and, thereby, in substance, give effect to the object of Pt 5.3A as soon as reasonably practicable, notwithstanding an extension of the period of time for convening the second meeting of creditors.

11    The principles applicable to applications for extensions of the convening period under s 439A(6) have been collected, summarised and applied in many judgments of this and other courts. It is not necessary to rehearse or cite them at any length. I consider them to be appropriately and correctly summarised by Banks-Smith J in Algeri (Administrator), in the matter of Murray & Roberts Pty Ltd (Administrators Appointed) (No 2) [2022] FCA 1563 at [8]-[13] and the authorities there cited. These principles may be summarised as follows.

(1)    When considering an application to extend the convening period, the Court must have regard to the object of Pt 5.3A set out in s 435A, to which reference has been made above, and reach an appropriate balance between the expectation that an administration will be undertaken in a relatively speedy and summary manner with the need to ensure that the administration is not concluded without consideration of sensible and constructive options directed towards maximising the returns for creditors and any return for shareholders.

(2)    The administrators’ view on such an application is significant, and particularly where the administration is complex, it should carry weight.

(3)    In considering an application for extension, the Court must take into account the detriment to third parties, including the suspension of rights and remedies of secured creditors, lessors and others.

(4)    The Court has recognised that the interests of creditors can be prejudiced not only by delay but by the convening of premature meetings where the administrator has been unable to obtain adequate information for the preparation of the administrators’ report in a form enabling creditors to make an informed decision.

12    The following categories of cases have been identified in the authorities where extensions have been granted: (a) where the extension will allow for the sale of business as a going concern; (b) where the size and scope of the business in administration is substantial; and (c) more generally, where additional time is likely to enhance the return for unsecured creditors. It is that last factor that has a particular significance on the application presently before me.

13    A last point of summary may be taken from Mighty River International Ltd v Hughes [2018] HCA 38; 265 CLR 480 at [73] (Nettle and Gordon JJ, in dissent, but not relevantly on this aspect), which has been cited in many authorities. There, their Honours observed, that, generally speaking, courts have been disposed to grant substantial extensions in cases where the administration has been complicated by, for example, the size and scope of the business, substantial offshore activities, large numbers of employees with complex entitlements, complex corporate structures and intercompany loans and complex recovery proceedings, and, more generally, where the additional time is likely to enhance a return to unsecured creditors. Provided the evidentiary case for extension has been properly prepared, there has been no evidence of material prejudice to those affected by the moratorium posed by the administration, and the administrators’ estimate of time has had a reasonable basis, the courts have tended to grant extensions for periods sought by administrators.

14    Within that framework, it is important to bear in mind the object of Pt 5.3A. Thus, while there is an expectation that the second creditors’ meeting will be convened and held promptly, the powers in s 439A(6) and s 447A reflect that it may be appropriate to extend the time to attain the objects of Pt 5.3A. Similar considerations apply to a Daisytek order, which permit the meeting, in effect, to be convened as soon as reasonably practicable within the extended period and thereby give effect to the object of Pt 5.3A, as already mentioned.

15    Against that background and those principles, I now turn to consider the relevant facts and reasons on which the administrators rely in seeking extension of the convening period in this case.

16    The affidavit material indicates that the administrators have encountered certain difficulties in obtaining access to relevant information within the books and records and other financial information of the company due to the company not using standard accounting software and, instead, storing and recording its financial information in construction project management software. The company's data in that software being intermingled with data for other entities related to it within the Ausglobal Group raises concerns for the administrators regarding the accuracy of the data as recorded in the project software. There are also some difficulties communicating and obtaining information in a timely manner from the company's internal accountant, whose first language is not English. There are other company books and records stored in repositories that are not controlled by the company, which are intermingled with books and records of other related entities. And, while the administrators have made formal requests for information under s 438C of the Act, not all that information has yet been forthcoming.

17    Since the administrators have been appointed, for those and other reasons, they have not been able to investigate completely some aspects of the company's operations, including information that would permit them to understand sufficiently the extent of the company's legal obligations under the remaining project. As to one of the completed projects, the company may have a claim for retention money that may be material, but the administrators have not yet had access to sufficient information to assess the validity of that claim and aspects relating to cost overruns on the project. Further, if an extension of time were granted, there is a prospect that the company's director, Mr Su would make a proposal that might result in a deed of company arrangement proposal being made to the administrators for consideration by the company's creditors. The evidence before me indicates that Mr Su requires time to formulate that proposal and wishes to understand the outcome of the administrators' investigations as they may be relevant to the terms of any proposal.

18    Additionally, if an extension of time were granted, there also appears to be a prospect that Mr Su would agree to fund a forensic investigation into matters that are the subject of Mr Shaw's confidential affidavit. For reasons that I will come to, I am satisfied that it is in the interest of the administration of justice that the facts deposed in that confidential affidavit remain confidential, at least until the investigation is completed. However, without publishing the contents of the affidavit, it is appropriate that I indicate that I am satisfied from the facts deposed in it that the administrators will be justified in undertaking a forensic investigation into certain of the historical affairs of the company. Further, depending upon the outcome of those investigations, the assets to the company available for distribution amongst creditors may be augmented. I infer from the facts deposed to in Mr Shaw's open affidavit and Mr Su's evident willingness to fund the forensic investigation, that any proposal of Mr Su or its terms may be linked to the outcome of the forensic investigation. I also infer from all the matters I have just referred to that the administrators' ability to form a meaningful opinion on the matters set out in s 438A and for the major report, and therefore the creditors' resolution at the second creditors meeting would benefit from an extension of the convening period. I also take account of the difficulties and delays the administrators have encountered and give due weight and regard to their opinion that an extension is required and to the length of that extension.

19    I also take into account that notice of the administrator's intention to apply for an extension was given to creditors at the first meeting of creditors. Notice was also given to the creditors by a circular dated 31 July 2024, although it indicated there was an intention to apply to the Supreme Court of Western Australia for orders to extend the convening period. Notice was separately given to certain creditors with an interest registered under the Personal Property Securities Register, which had not responded to earlier communications from the administrators. As at the date of this hearing, no creditors or persons who have otherwise been given notice of the administrators' intention to apply for an extension of time have made any objection to an extension. Having regard to the ex parte nature of the application, and that it has been brought in this Court and not the Supreme Court, I am nonetheless satisfied that the creditors have had appropriate notice, but that, in accordance with the proposed orders, interested parties should have an opportunity to apply to set aside or vary the orders. It follows that I am satisfied that it is in the interests of the creditors in all circumstances to extend the convening period for a period of two months and to make what is referred to as a Daisytek order.

20    In relation to confidentiality, the administrators also seek an order pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth) to the effect that Mr Shaw's confidential affidavit not be disclosed to any third party until further order of the Court. The Court's power to make an order of that nature is contained in Pt 5AA of the Federal Court Act. Section 37AF provides the Court may, by making a suppression or non-publication order on grounds permitted by that Part, prohibit or restrict the publication or other disclosure of, amongst other things, an affidavit of the kind that Mr Shaw has made that has been filed in the Court.

21    The grounds for making such an order are provided in s 37AG and they include that it is necessary to prevent prejudice to the proper administration of justice. Section 37AH, however, sets out a procedure for making an order, a non-publication or suppression order, that provides, in effect, for notice to be given to potentially interested parties before such an order is made. Section 37AJ provides that, in general, the order should operate for a period specified in the order, rather than being of an indefinite duration. Lastly, it is important to draw attention to s 37AE, that provides that in deciding whether to make a suppression or non-publication order, the Court must take into account that a primary objective of administration of justice is to safeguard the public interest in open justice. Nonetheless, and while I am persuaded that, at least until the forensic investigation is completed it is appropriate to maintain the confidentiality of Mr Shaw's confidential affidavit, having regard to s 37AE, s 37AJ, together with the absence of the procedure required by s 37AH having been completed, I am not persuaded that an order should be made under s 37AF at this time. That said, I am persuaded that to disclose the facts deposed in an affidavit at this time, to certain non-parties at least, may not be in the interests of the administration of justice. As the Federal Court Rules 2011 (Cth) stand, non-parties are not entitled, as of right, to inspect affidavits filed in the Court, pursuant to r 2.32(2). That is generally a sufficient safeguard against disclosure of sensitive material to non-parties. However, in the circumstances of this case, it is appropriate that some modifications be made to the general regime. Therefore, I will make an order that will direct the Registrar to refer any application for leave to inspect the confidential affidavit to a judge of the Court and that any non-party applicant must give notice of the application to the administrators and the company.

22    For these reasons, orders will be made substantially in terms of the administrators’ minute of proposed orders with some variations.

Associate:

Dated:    27 September 2024